Lesaka Technologies, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Key Developments: Consumer division had record EPE enrollments; acquisition of Recharger included in Q3 results; debt facilities refinanced; MobiKwik's share price volatility impacted results; employee share ownership plan launched.
• Merchant Division: Acquired Adumo, now has over 81,000 points of presence; throughput on devices at ZAR 9.9 billion; software business has 9,640 sites with ARPU of ~ZAR 3,360 per month.
• Consumer Division: Serves 1.9 million consumers monthly; market share increased to 13%; lending gross advances rose 54% year-on-year; insurance active policies grew 27% year-on-year.
• Enterprise Division: Exited point-of-sale hardware business; acquired Recharger; EasyPay bill payments processed ZAR 8 billion in throughput; Prism Switch processed over 2 million transactions.

Segment Performance

• Merchant division: Net revenue was up 58% to ZAR 782 million, with segment adjusted EBITDA up 7% to ZAR 150 million for Q3 2025. The division has over 81,000 points of presence, with throughput on devices at ZAR 9.9 billion for the quarter.
• Consumer division: Revenue grew 32% year-on-year to ZAR 446 million, and segment adjusted EBITDA increased 65% to ZAR 117 million. Permanent SASSA grant customer base grew 17% year-on-year to 1.5 million, with lending and insurance originations at record levels.
• Enterprise division: EBITDA was ZAR 2 million, down from ZAR 14 million last year. FY 2025 is a build year with restructuring costs, but EasyPay bill payments processed ZAR 8 billion in throughput, up 12% year-on-year.

Guidance

• FY 2025: Reaffirms revenue guidance of ZAR 10 billion to ZAR 11 billion, net revenue of ZAR 5.2 billion to ZAR 5.6 billion, and Group adjusted EBITDA of ZAR 900 million to ZAR 1 billion.
• FY 2026: Anticipates revenue of ZAR 11.4 billion to ZAR 12.2 billion, net revenue of ZAR 6.4 billion to ZAR 6.9 billion, and Group adjusted EBITDA of ZAR 1.25 billion to ZAR 1.45 billion. Also expects positive net income on U.S. GAAP basis by FY 2026 year-end.

Risks

• Currency Fluctuations: Significant impact on results due to exchange rate movements between USD and ZAR.
• MobiKwik Lock-up: Share price volatility of MobiKwik affects net debt to Group adjusted EBITDA ratio as shares are locked until June 2025.
• Integration Challenges: Challenges in integrating products and people across divisions, including costs related to reorganization and realignment.

Question and Answer

Q: Comment on Consumer market share gains and continuation into April/May.

A: Lincoln Mali stated Consumer division increased market share to 13% and saw record lending and insurance sales in March 2025, with April 2025 outperforming, expecting growth to continue.

Q: Merchant market growth vs. contributors.

A: Steven Heilbron noted net revenue growing 58% year-on-year, with organic growth at market rates; card acquiring growing at market, and supplier payments business saw 57% growth, with plans to restore prepaid growth.

Q: Enterprise division contribution and deterioration.

A: Daniel Smith said FY 2025 is a rebuild year with legacy business closures, but new verticals like electricity and switch investments are expected to make Enterprise a material contributor by FY 2026.

Q: Capital allocation to cash vaults.

A: Daniel Smith explained cash vaults are part of holistic merchant offering, digitizing cash and enabling cross-sell, with ancillary services leading to attractive unit economics.

Q: Margin evolution.

A: Ali Mazanderani said Consumer division margin could reach north of 30%, Merchant division margin expected to improve, and Enterprise division aims for EBITDA margins north of 20%, with Group adjusted EBITDA to net revenue margin expected to be north of 20% in FY 2026.